Contents

PREFACE ........................................................................................................................................................ 2 ACKNOWLEDGEMENT ................................................................................................................................... 3 Introduction to the Project ........................................................................................................................... 4 HISTORY OF HABIB BANK LIMITED ................................................................................................................ 5 SHAREHOLDING STRUCTURE .................................................................................................................... 6 THE SPONSORS.......................................................................................................................................... 6 ENTITY RATING .......................................................................................................................................... 6 Initial Public Offering (IPO) ........................................................................................................................... 7 Expenses to the Issue .............................................................................................................................. 10 Commission To The Bankers To The Offer .......................................................................................... 10 Brokerage ............................................................................................................................................ 10 Expenses Of The Offer For Sale Of Shares .......................................................................................... 10 Analysis ....................................................................................................................................................... 11 Conclusion ................................................................................................................................................... 13

PREFACE
Research project is an important part of management courses. Theoretical studies in classroom are not sufficient to understand the functioning of complex and large siz e o r g a n i z a t i o n s , managerial climate and the real problems coming in the way of management of Man, Material, Machines and Money. Looking at the complexities of the situation, students are required to work in a project, which form part of the MBA programs. conducted by most of the students of during the working on project undertake a practical universities and institute imparting management education or theoretical project in order to analyze, interpret and report on one or more management problem and situation. The research project on IP of HBL is an overview of HBL financial strength that p r o v i d e s a b r i e f i d e a t o i n v e s t o r s i n c o n c e r n w i t h t h e i n v e s t m e n t i n with the bank. It is helped that the activity carried out with dedication will open up new vistas for the budding managers as well as grooms them to broadly share the responsibilities in future.

ACKNOWLEDGEMENT
It is not until you undertake a project like this one that you realize how massive efforts it really is, or how much you must rely upon the selfless efforts and goodwill of others. We got an opportunity to learn and experience ethics and environment of bank. We wish to express our deep sense of gratitude to our teacher Mr. Naveed Tehseen , Lecturer Paf-KIET of MBA. Whose teaching has made us enable to understand the financial conditions of a firm and to do analysis on its financials strength.

Introduction to the Project

The project which we have taken is IPO of HBL. In this we have studied that how the IPO of HBL has impacted on its financial strength and how it was perceived by the investors . It also stated the history of HBL that when it was nationalized and the privatization porecess. The IPO of HBL is an analysis of the IPOs which have a great contribution in the development or growth of the bank. It also explainsthe preferences of Investors about investments in the banks shares. What factors an investor viewed in order to determine the answer should s/he make an investment in the IPO of HBL. This reports is divided into the phases. Background, in which we discussed in details about the history of HBL. That when it was formed and how it was nationalized and then privatized. The second phased discuss about the process of Sales of Habib banks shares to the general public. In the third and final part we analysis the impact of IPO on Habib banks functions, growth.

HISTORY OF HABIB BANK LIMITED

HBL was established on August 25, 1941. At the time of incorporation, the Bank had a paidup capital of PKR 2.5 million. Following the creation of Pakistan, the head office of the Bank was shifted to Karachi in 1947. The early years of the Bank were characterized by strong growth profitability, branches, deposits and advances. The Bank entered into the international market in 1951 and opened its first overseas branch in Sri Lanka. Subsequently, the Bank expanded its presence to Africa, America, Europe, Far East, South Asia and the Middle East. HBL was nationalized under the Nationalization Act, 1974 on January 1, 1974. During the early 1980s the Bank played its part in economic development and extended credit facilities to a number of sectors at subsidized rates under various arrangements including export finance, local manufactured machinery, government borrowing for commodity operations, mandatory production credit to small farmers and direct industrial investment. In addition, the Bank continued to expand its overseas network and opened branches in France, Belgium, Turkey, Netherlands, Maldives, Seychelles, Bangladesh and the Islands. During the late 1970s and early 1980s, HBL accounted for a major share of the inward remittances routed through official banking channels. Habib Credit and Exchange Bank which was incorporated in 1992 was a wholly owned subsidiary of HBL. Habib Credit and Exchange Bank was sold off to the Abu Dhabi Group (UAE) by the PC in 1997 through open bidding. Under the GoP reforms, efforts were initiated in 1996 to prepare the Bank for privatization. Accordingly, senior experienced bankers were hired from reputable foreign banks to reinvigorate and restructure the Bank. In additionto implementing a financial re-structuring program, where the Bank was recapitalized through the issuance of right share amounting to PKR 8 billion, the management also implemented a staff and branch rationalization plan. Consequently, some of the branches were closed or merged and the staff strength was reduced from 31,099 to 14,572. As part of the privatization strategy, the GoP initiated the privatization of HBL in 2000. Through the defined process, 51% shares of HBL were acquired by the Aga Khan Fund for Economic Development (AKFED) for a price of PKR 63.68 per share and the management of the Bank was transferred on February 28, 2004. Key initiatives introduced since privatization include (a) upgrading the IT and communication system (b) strengthening management and enhancing its capacity and (c) rebranding and repositioning the Bank in the domestic as well as in the international markets. As a result of these initiatives, the Banks core banking system has been fully upgraded and as of December 31, 2006 271 branches are online, while over 1,000 branches are expected to become online by the end
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of 2007. Strategic measures have been taken to position the Bank for expansion in high growth markets such as in Africa, Central Asia and the Middle East. An ambitious progress for upgrading the branches is underway. Service levels have been improved and overall deli very channels have been strengthened. Staffing levels have been further rationalized and general skills at all levels have been improved. The professional management of AKFED introduced a number of initiatives to revamp the Bank and to establish policies, procedures and systems in line with modern banking requirements. In addition, the management also outlined a long-term strategy for the Bank to ensure that the Bank continues on the path to recovery. Under the management of AKFED, the Bank has shown exceptional progress as evident from its increasing deposit base, soaring advances and improving income.

SHAREHOLDING STRUCTURE
The Bank was privatized in 2004 with 51% of its shares sold to AKFED. Furthermore, SBP holds 48.047 of the total paid up capital, and the remaining 0.953% is held by National Bank of Pakistan (Trustee Department), Privatisation Commission, Government of Pakistan and SECP.

THE SPONSORS
The Sponsors comprise of AKFED holding 51% stake in the Bank while the State Bank of Pakistan holds 48.047% share in the Bank.

ENTITY RATING
The Bank has been assigned a long term entity rating of AA+ (Double A plus) and a short term entity rating of A-1+ (A-One plus) with a stable outlook by JCR-VIS Credit Rating Company Limited. The entity rating assigned to HBL is amongst the highest ratings assigned to private sector banks in Pakistan.

Initial Public Offering (IPO)

Before going into the deep discussion of IPO of HBL its important to mention the occurrence of Privatization of HBL. HBL was nationalized under the Nationalization Act, 1974 on January 1, 1974. Later in 2000 as part of the privatization strategy, the GoP initiated the privatization of HBL. The bidding for the privatisation of Habib Bank Limited (HBL) was held on December 29, 2003 under the supervision of the then Federal Minister for Privatisation & Investment, Dr. Abdul Hafeez Shaikh. The pre-qualification committee, which included representatives of various ministries including Finance and the State Bank of Pakistan, had pre-qualified three parties for the bidding. These parties included Agha Khan Fund for Development, Central Insurance Company Limited and State of Qatar Supreme Council for Economic Affairs and Investment. In that privatisation process Aga Khan Fund for Economic Development (AKFED) got the rights to 51% of the shareholding in HBL, against an investment of PKR 22.409 billion (USD 389 million) for a price of PKR 63.68 per share. Furthermore, SBP holds 48.047 of the total paid up capital, and the remaining 0.953% is held by National Bank of Pakistan (Trustee Department), Privatization Commission, Government of Pakistan and SECP. On February 26, 2004, management control was handed over to AKFED. The Board of Directors was reconstituted to have four AKFED nominees, including the Chairman and the President/CEO and three Government of Pakistan nominees. The Banks profitability since privatisation has improved at a Compound Annual Growth Rate of 53% and Advances have grown at 24% per annum. In 2007 HBL issued its share for the general public. The purpose of this Offer was to invite the general public to subscribe to the Banks shares for broadening the ownership base, further strengthening the capital market and passing the benefits of privatization to the common man. Habib Bank Limiteds Initial Public Offering generated Rs. 8.1 billion and oversubscribed by 2.33 times. At that time its was the largest IPO in the history of Pakistan. As per the requirement Privatization Commission, Government of Pakistan obtained the approval of Securities & Exchange Commission of Pakistan (SECP) and circulated Offer for Sale Document (OFSD). The OFSD was cleared by the Karachi Stock Exchange (Guarantee) Limited (KSE), Lahore Stock Exchange (Guarantee) Limited (LSE) and Islamabad Stock Exchange (Guarantee) Limited (ISE). The Offer for the Sale of Shares of Habib Bank Limited (HBL) was held in Karachi on July 23, 2007 and in Lahore on July 24, 2007. The Offer for Sale was conducted by the Privatisation Commission, Government of Pakistan out of State Bank of Pakistans shareholding in HBL.
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The sale was offered to both Resident Pakistani Investors that included Pakistani Investor includes Pakistani citizen resident in Pakistan; Companies, bodies corporate or other legal entities incorporated or established in Pakistan and Non Resident Pakistani Investor Including Pakistani citizen resident outside Pakistan; and Persons holding two nationalities including Pakistani nationality. For Resident Pakistani Investors total allocation was 80% from the total offering shares. And the remaining 20% was reserved for the Non-Resident Pakistani Investors. Global Securities Pakistan Limited was appointed as the Lead Manager for the Transaction. 34,500,000 shares (5% of the Paid-up Capital) of HBL were offered at a price of Rs.235/(inclusive of a premium of Rs. 225/- per share. Subscription for number of shares were 100, 200, 300, 400 and 500 shares or in multiples of 500 shares. The minimum amount of application for subscription of 100 shares was PKR 23,500/- (inclusive of transfer fee) both in the case of physical transfer and transfer under book entry system. The Subscription list occurred from July 26 2007 to July 31th 2007 (5 days). In case of over subscription, the Offerer may exercise the Greenshoe option, and offer upto 17,250,000 additional ordinary shares (2.5% of Paid up capital) out of SBPs shareholding in the Bank.

Expenses to the Issue

Commission To The Bankers To The Offer

A commission at the rate of 0.25% of the amount collected on allotment in respect of successful applicants will be paid by the Offerer to the Bankers to the Offer for services to be rendered by them in connection with this Public Offer.
Brokerage

For the Public Offering, the Offerer will pay brokerage to the members of the Stock Exchanges at the rate of 1.00% of the value of shares (including premium) actually sold through them.
Expenses Of The Offer For Sale Of Shares

The expenses of this Offer are estimated not to exceed PKR 177,445,500 of which the listing fees of the Stock Exchanges and application processing fee of SECP shall beborne by the Bank while expenses to the Offer shall be borne by the Offerer.

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Analysis

2007

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Conclusion
After the in-depth analysis of Habib Bank Limiteds financial statements before and after the IPO we have reached to the following conclusions: Habib Bank is one the largest bank of Pakistan. Its the market share of about 20% and had a huge reserves, more than thousands in-country branches and other international branches. This had positive impact on the investors who wanted to so investment on HBLs IPO. Therefore the IPO was a huge success and merely one of the largest IPO in the history of Pakistan. The over subscription proves that investors had great interested in the IPO of HBL. After the IPO we can clearly seen in the above table, about the change in financial strength of HBL. Earning per share has also improved thus showing the profitability of HBL.

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